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S Corp Health Insurance Deduction

MarinaEA
Level 3

Why is Pro Series not allowing an S Corp shareholder health insurance correctly reported on W-2 to flow to 1040 as a deduction when shareholder also receives a form 1095-A (with no premium tax Credit?)
What is the way around is if any? If not, what should I suggest to do the next year to avoid this issue and being able to take the health insurance deduction? 

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TaxGuyBill
Level 15

Enter the 1095-A and link it to the corporation.

On the K-1 worksheet, DON'T enter the cost of health insurance, BUT you NEED to enter Medicare Wages.  That SHOULD trigger the 1095-A (that you already linked to the corporation) to give the Self Employed Health Insurance deduction.

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Just-Lisa-Now-
Level 15
Level 15
Youve scrolled to the bottom of the 1095A form and linked it to the K-1?

(I dont have any of these clients, but just wanted to make sure it wasnt a missed data entry field)

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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MarinaEA
Level 3

Yes, I did. 

I believe, there is some IRS rule not allowing this. Trying to get more information and how to avoid this next time.

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MarinaEA
Level 3

Just found this, and I am puzzled.

 

This is governed by Revenue procedure 2014-41, and leads to an unfavorable taxpayer conclusion, where essentially the PTC which they do not end up being allowed to claim reduces their SEHI adjustment.

 

https://www.irs.gov/pub/irs-drop/rp-14-41.pdf

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Just-Lisa-Now-
Level 15
Level 15

I know there were lots of issues with the SEHI and PTC throughout the season.   @TaxGuyBill  may be able to weigh in on this.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
MarinaEA
Level 3

Thanks, Lisa for tagging him. That was helpful! 

TaxGuyBill
Level 15

On the K-1 worksheet, there is a section about health insurance.  Because of the 1095-A you DON'T enter the cost of insurance there, but you DO need to enter the Medicare Wages (Box 5 of the W-2) in that section of the K-1 worksheet.  Did you do that?

 

MarinaEA
Level 3

 OK, I see the SE health insurance deduction worksheet I can link to the K1 and the medicare wages you are referring to. So you are saying do not link 1095A to the S Corp but enter the amount there, correct? Or do not include 1095A at all? 

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TaxGuyBill
Level 15

Enter the 1095-A and link it to the corporation.

On the K-1 worksheet, DON'T enter the cost of health insurance, BUT you NEED to enter Medicare Wages.  That SHOULD trigger the 1095-A (that you already linked to the corporation) to give the Self Employed Health Insurance deduction.

View solution in original post

MarinaEA
Level 3

Got it! Thank you!

I am curios. The 1095A does not flow to the 1040 health insurance deduction without this extra step due to the PTC limitation and SEHI? 

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TaxGuyBill
Level 15

For a S-corporation shareholder, the Self Employed Health Insurance deduction is limited to the person's regular wages from that corporation, which is Box 5 of the W-2 (for a Schedule C business the deduction is limited to the profit of the business).  Until you fill that out, the program limits the deduction to $0 (zero wages equals zero deduction).